Effect of organizational culture on innovation in Finnish companies

Abstract. Innovation is a phenomenon of major importance to companies. Entrepreneurial organizations recognise the necessity of innovation to survive in rapidly changing business environments. However, companies generally feel dissatisfied with their levels of innovation despite the vast resources spent on trying to generate higher levels of innovation. Researchers have been attempting to understand the processes of innovation within entrepreneurial organizations. Focus on the organizational level has observed how organizational structure and organizational learning capabilities affect the level of innovation in an organization. A corporate survey in 2018 indicated that a significant perceived obstacle to innovation is “cultural issues”. A significant strand of the literature has studied the effect of organizational culture on innovation. Organizational culture refers to the shared beliefs and attitudes within the organization. Most of the research has utilised the Competing Values Framework (CVF). The CVF identifies four main culture types: adhocracy, clan, market, hierarchy. These culture types are distinguished by their differences in structure and focus. The prior research mainly uses quantitative methods to observe correlations between each of the culture types and product innovation. The consensus of the prior research: adhocracy facilitates innovation and hierarchy hinders innovation. There have been mixed findings pertaining to clan culture and market culture with some studies also choosing to neglect observation of these two. This research builds on the previous literature by utilising the CVF and quantitative methods (hierarchical regression analysis) to observe the correlations for each of the four culture types and innovation in Finnish companies. The aim is to identify which culture type is optimal for product innovation. The context of Finland is distinct from previous studies which have primarily been conducted in large European economies such as Germany and Spain. This research solicits responses from executives and C-level employees in Finnish companies to two questionnaires: Organizational Culture Assessment Instrument and Innovation Metric Questionnaire. The responses from these questionnaires indicate predominant organizational culture types and level of innovation performance, respectively. The findings suggest that adhocracy culture is a positive influence on a firm’s innovation performance, consistent with previous research. However, the lack of significant correlations for the three other culture types suggests that the CVF model lacks explanatory power